Ringgit at highest level in 20 months against US Dollar

KUALA LUMPUR: The ringgit surpassed the 4.30 level today, reaching its highest in 20 months against the US dollar as traders anticipate the Federal Reserve (Fed) may lower rates by 25 to 50 basis points, according to an economist.

According to Bernama, by 6 p.m., the ringgit had risen to 4.2975/3050 against the US dollar from the closing level of 4.3330/3370 on Thursday.

Dr. Mohd Afzanizam Abdul Rashid, Chief Economist at Bank Muamalat Malaysia Bhd, said the ringgit performed strongly today, surpassing its support level of RM4.3259, with the next support level expected at RM4.2128.

“The market seems to expect a Fed rate cut between 25 and 50 basis points. Looking at the interest rate futures contracts, the US Fed is likely to cut by 50 basis points, bringing the Fed Funds Rate down to 5.00 percent from 5.50 percent.

“This would narrow the gap with Malaysia’s overnight policy rate at 3.00 percent,” he told Bernama.

Meanwhile, Stephen Innes, Managing Director at SPI Asset Management, said the ringgit strengthened due to the weakness of the US dollar ahead of the anticipated Fed rate cut.

“The Fed is expected to take a more aggressive stance next week due to easing inflation and former Fed New York President Bill Dudley’s call for the Fed to shift from a data-dependent stance to a forward-looking approach.

“This shift in sentiment has raised the likelihood of a cut of more than 50 basis points, which could trigger dollar sales, benefiting regional currencies such as the ringgit,” he said.

At the close of trading, the ringgit was mostly higher against other major currencies.

The local currency strengthened against the euro to 4.7664/7747 from 4.7724/7768 on Thursday, improved against the British pound to 5.6439/6538 from 5.6550/6602 previously, but weakened against the Japanese yen to 3.0570/0625 from 3.0364/0395.

The ringgit also traded mostly higher against other ASEAN currencies.

The local unit rose against the Singapore dollar to 3.3098/3159 from 3.3190/3224, improved against the Indonesian rupiah to 278.9/279.6 from 280.6/281.0, and gained against the Philippine peso to 7.67/7.69 from 7.71/7.73, but fell against the Thai baht to 12.8907/9190 from 12.8351/8527 previously.